Canadian Tax Podcast 004 – Home Office/GST/Foreign Exchange

Canadian tax podcast for the week of 24 March 2021. This week we cover:

• Headlines;
• Home office / T777S;
• Self-employed GST/HST;
• When to claim forex gains/losses;

Show notes for the week:

[INTRO]:

“This is the Canadian Tax Podcast, Episode # 004,  hosted by me, Cameron Ware. Good morning”

 [NEWS SECTION]

• “Happy Monday, it is the week of March 22nd. Here are the headlines.

 [ITEM 1] – CRA & Social Media

• https://www.cbc.ca/news/politics/taxes-cra-facebook-big-data-1.3941416
• [read]
• Really no different from the lifestyle audits that cra conducts
• Team of 60 people
• Doing some “exploratory audits”, intention to ID and test the best practices and techniques to spot undeclared revenues
• So far reassessed about $500k in extra taxes
• Issues about privacy. CRA hanging out online, browsing facebook. Can they legally do that when no review has been triggered?
• Return on efforts. $500k sounds like a lot, but a review/reassessment of public company can net that or more in one audit.

[ITEM 2] – IRS Extension

• IRS extension from Apr 15^th to May 17^th
• People happy, most preparers aren’t
• IRS still processing 2019 returns.
• Mess

 [ITEM 3] – Canadian banks/IRS reporting

• https://www.cbc.ca/news/politics/tax-fatca-canada-us-1.5957194
• Canadian banks reporting bank balances to IRS when they don’t need to.
• Rules are accounts held by Canadian Resident/US Citizens over $50k need to be reported to IRS (FATCA rules)
• These are reported to CRA by banks, CRA released info to IRS
• Canadian banks getting sloppy, just boilerplate releasing information as cover-their-butt
• CRA contact Christopher Doody commented that [quote A]
• Separately, why is CRA reporting to the IRS? (Ask Switzerland)

 [ITEM 4] – gross negligence cases

• https://www.cbc.ca/news/canada/british-columbia/cra-gross-negligence-demara-penalties-1.5945861?__vfz=medium%3Dsharebar
• https://www.canlii.org/en/ca/tcc/doc/2021/2021tcc14/2021tcc14.html?searchUrlHash=AAAAAQAJdmFuY291dmVyAAAAAAE&resultIndex=3
• Mrs Bowker. Engaged accountant to file return (actually husband did.)
• In 2014, 2010 year reassessed – amended return was initially filed, claiming cap loss of $333k, business loss of $600k
• CRA threw out the losses, applied $139k in gross negligence penalties
• Question before the court was “were negligence penalties legit”
• “the Court has determined that while Mrs. Bowker made some mistakes, her conduct did not markedly depart from what would be expected from a reasonable and responsible taxpayer in the circumstances. As such, the Court finds that Mrs. Bowker did not, under circumstances amounting to gross negligence, participate in the making of the false statements in her 2010 Amended Income Tax Return.”
• Interesting because CRA caught the ruse anyway. $192mil in fake expenses filed by DeMara, but only $53k was “refunded” to the taxpayer making the claim
• Don’t just sign your stuff. Review it, ask questions, understand what is going on.

QUESTIONS

• Home Office
  • Asked “Explain this home office thing again”
  • If you’re home for 2 weeks out of 1 month during Mar-Dec/19, you can claim the $2/day election
  • Fill out the T777S, check the box in Part 1, fill out number of days.
  • No paperwork needed etc
  • Should they do detailed method?
  • Try using CRA’s calculator.
  • https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-return/completing-a-tax-return/deductions-credits-expenses/line-229-other-employment-expenses/work-space-home-expenses/calculate-expenses.html
  • You’ll find it will probably work out better in terms of math.
  • No paperwork signed by employer T7700S
• Self-Employed HST
  • [read question]
  • What to do once over $30k
  • Apply before hand so you don’t get in trouble. $26k is a good marker threshold.
  • Invoices pre-registration, don’t worry about. Post = bill it
• Forex gains – When to declare
  • CRA says they happen when a transaction occurs. Not unrealized gains/losses from currency fluctuations.
  • Common items where you need to worry about forex:
  • USD stock trading. Forex when you buy something. Forex on proceeds. Forex on any income received. Report in Sch 3 (Capital gain)
  • Currency trading. Similar to above, convert to CDN for both purchase and sale. Report gain on Sch 3 (Capital Gain)
  • Day trading currency. Business income. Sch T2125 as business income, Line 162 most likely

OUTRO

That will wrap things up for today. If you have any questions, send them to questions@canadiantaxpodcast.ca, or find us on twitter.   This is Canadian Tax Podcast, thanks for listening. 

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